Here's Why Roblox (RBLX) is a Relative Performance Headwind for the ClearBridge Mid Cap Growth Strategy

ClearBridge Investments, an investment management company, released its “ClearBridge Mid Cap Growth Strategy” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. Following the soft start to the year, the midcap fund rebounded in the second quarter, driven by demand for AI and a low-quality rally, which enabled the growth stocks to overcome the tariff-led uncertainty. The strategy failed to outpace the benchmark, despite strong absolute returns, due to limited exposure to several of the rally’s leading participants. However, the firm is optimistic about the ability of the mid-cap growth universe to offer attractive long-term compounders. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, ClearBridge Mid Cap Growth Strategy highlighted stocks such as Roblox Corporation (NYSE:RBLX). Roblox Corporation (NYSE:RBLX) is an immersive platform for connection and communication. The one-month return of Roblox Corporation (NYSE:RBLX) was 10.95%, and its shares gained 181.62% of their value over the last 52 weeks. On August 27, 2025, Roblox Corporation (NYSE:RBLX) stock closed at $122.70 per share, with a market capitalization of $85.061 billion.

ClearBridge Mid Cap Growth Strategy stated the following regarding Roblox Corporation (NYSE:RBLX) in its second quarter 2025 investor letter:

Despite strong absolute returns, the ClearBridge Mid Cap Growth Strategy failed to keep pace with its benchmark in the second quarter due to limited exposure to several of the rally’s leading participants — Palantir Technologies and Cloudflare in information technology (IT), Axon in industrials and Roblox Corporation (NYSE:RBLX) in communication services. Roblox, which we do not own stemming from our concerns about children’s safety on the platform and the company only just now starting to compound cash flow, rose 80% in the quarter and also acted as a relative performance headwind in communication services.

Roblox Corporation (NYSE:RBLX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 75 hedge fund portfolios held Roblox Corporation (NYSE:RBLX) at the end of the second quarter, which was 68 in the previous quarter.  In Q2 2025, Roblox Corporation’s (NYSE:RBLX) revenue grew 21% year-on-year to $1.1 billion. While we acknowledge the potential of Roblox Corporation (NYSE:RBLX) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Roblox Corporation (NYSE:RBLX) and shared the list of big names with surprising gains. Roblox Corporation (NYSE:RBLX) contributed to the performance of Artisan Mid Cap Fund in Q2 2025. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.